Fintech: Cina stops the big players of digital payment

Fintech: Cina stops the big players of digital payment

Ant and Tencent control over 90% of the Chinese market of digital payments. In a Country where everything is paid by apps, the Government steps in to slow down the growth of internet big names in the financial market. And it is not the only one.

The Chinese government has introduced some new rules to contain the excessive power of web giants which mainly target groups such as Alibaba, Ant Group and Tencent, followed by other platforms such as Meituan app, the operator specializing in food deliveries. Beijing is scared by the rocketing figures of Fintech big players: the daily use of digital payment apps such as Alipay and WeChat in China is the rule nowadays and they may easily escape governmental control. (Don’t even try paying cash in China).

Apps are better than credit cards

Paying by credit cards, in CHina, is not common. Do not even think about cash. Fintech rules here: everybody uses mobile payments, whether they need to pay a Didi ride (the Chinese equivalent of Uber), a piece of fruit taken from a street stand or the latest chapter of an ebook costing just a few cents. If credit cards payments are an easy business, paying things by using an app is extraordinarily comfortable and fast. Basically, the Country has moved directly from paying cash to using smartphones. And apps have allowed businesses to smoothly connect to the contemporary financial infrastructure in a country in which banks are mostly controlled by the central government. (Don’t even try paying cash in China).

Ant and Tencent: head-to-head at the top of the heap

Ant was the pioneer of financial inclusion in China, where millions of people are still not part of the formal bank system. Tencent, on the other hand, has caught up and progressed quite rapidly in digital finance. Both companies have ventured into Fintech starting from digital payments: Alipay, Ant’s crown jewel, sells micro-loans and insurance policies, allows users to pay bills and book hospital services. Tencent incorporates financial services among WeChat and QQ payment functions so it is difficult to estimate how much they may get from the Fintech market. Judging on figures  they are quite close to each other. 729 millions of Alipay annual billion users have made some sort of transactions related to a financial service through the platform.  Starting from 2019, over  800 million users and 50 million marketers have been using WeChat for payments. Last year Ant recorded  a total amount of 121 billion Yuans (17 billion dollars) of revenues , almost double the amount earned since 2017. In 2019, Tencent generated 101 billion Yuans from his “fintech and business” services. Overall, the two companies control over 90% of the Chinese market of digital payments, with Alipay being slightly ahead of its competitor (The race to be China’s top fintech platform: Ant vs Tencent).

Beijing halt

The 22 page draft issued by the State Administration for Market Regulation (SAMR) represents the first attempt by the Government to define a list of anti-competition behaviours referred to the digital sector. The new rules are meant to prevent businesses from sharing sensitive data concerning users, from establishing partnerships to crush smaller competitors and from selling at a loss to get rid  of them. The regulations also apply to businesses differentiating customers according to their purchasing habits. Beijing has been focusing especially on Alibaba’s affiliate, Ant Group, which, last week, was forced to back from their floatation in the stock market  after the authorities had raised some concerns about the way digital payments may affect the financial market. The world witnessed to the biggest floating in history being stopped (the starting public offering had been estimated at about  37 billion dollars). The Chinese authorities, however, are not the only ones to have got worried about the boom experienced by some online platforms. The European Union has reported Amazon for abuse of power. In the meantime, the US authorities are trying to tackle Google monopoly through the biggest antitrust trial since the one which involved Microsoft at the end of the ’90s. A real war between Governments and businesses which, at the moment, at least in China, has re-established the dominance of the popular Republic but which  may end up in a different way in the next few months (China to clamp down on internet giants).

Who is going to win in the war for the ruling of financial markets: Fintech leaders or the Countries authorities themselves? Tweet @agostinellialdo

If you liked this post, you may also like WeChat porta d’accesso al mercato cinese. Come vendere bene/WeChat is the entrance door to the Chinese market. How to sell well